New Environmentalism

Energy and Natural Resources | Policy Reports

No. 201
Wednesday, January 01, 1997
by Lynn Scarlett

Executive Summary

This paper presents a commonsense approach to public policy toward the environment. Instead of focusing on what decisions should be made, it focuses on how they should be made and by whom. Specifically, the paper proposes a methodology for making decisions based on a covenant between citizens and their government. The covenant is an agreement about principles that will be used in making public policy decisions and about filters that will be relied on to determine the appropriate context for those decisions.

New Environmentalism

Traditional environmentalism assumes that in important ways people do not matter - our values don't matter; our level of knowledge doesn't matter; the incentives we face don't matter. Thus it assumes environmental problems can be analyzed and solved without reference to individuals and circumstances. In contrast, the new environmentalism recognizes that in order to solve complex problems, we must have an understanding of the values, knowledge and incentives of the affected parties.

Values. Traditional environmentalism assumes that environmental goals are sacrosanct, that they are more fundamental than other values. From this it follows that individuals' values are unimportant in formulating social goals. But environmental values are not sacrosanct. They are part of the many values that define the quality of human life. Time and resource constraints require that we make choices among these values.

Knowledge. Traditional environmentalism assumes that planners or other experts possess the knowledge most relevant to environmental problem solving and ignores the value of location-specific knowledge and the practical experience of ordinary citizens. New environmentalism recognizes that most information relevant to understanding and solving environmental problems varies by time, place and circumstance. Because environmental problems are complex and reality is dynamic, most of the relevant information is dispersed and not readily amenable to centralized gathering or use.

Incentives. Traditional environmentalism fails to appreciate the importance of incentives in guiding human action. New environmentalism focuses on decision-making processes and strives to create incentives for people to obtain the information to become good environmental stewards. Because of its respect for incentives, new environmentalism views the marketplace as an important mechanism for problem solving. It recognizes that wealth creation, appropriately harnessed, is an engine of environmental progress.

New Public Policy Paradigm

Most environmental problems arise because property rights and responsibilities are either nonexistent or are not clearly defined, enforceable and transferable. For example, if grazing land is owned in common, each herder has an incentive to overgraze. Their self-interested behavior leads to environmental degradation. Sometimes such problems can be solved by making rights and responsibilities explicit. If grazing land is converted from common property to private property, the owner has a personal interest in protecting it from degradation.

Private property solutions are not always feasible, however. For example, no one owns an air basin. It has no stewards to object to polluting air emissions. Thus decisions about the "clean air" level for an air basin are necessarily collective. But the political process is itself a commons in which people seldom bear the full costs of their bad decisions or reap the full benefits of their good decisions. Distorted political incentives often produce results harmful to both the environment and the economy.

The private property solution to the problem of overgrazing allows owners to erect fences and boundaries and declare certain actions off limits to others. Is there a way to constrain collective decision-making so as to avoid the worst consequences of the perverse incentives inherent in collective choice? We believe there is.

An Environmental Covenant

To channel collective decisions in a positive direction, we propose a covenant between the citizens and our government. Such a covenant would channel collective decision making to promote environmental goals as well as other goals and ensure that decisions are fair and reasonable. The covenant would have two components: (1) a set of principles to determine how decisions should be made and (2) a set of filters to determine the context in which they should be made.

Principles. These principles reflect widely held, generally accepted value judgments. The following are some examples:

Individualism Principle: Other things being equal, when individuals make their own decisions about what values to pursue, conflict is reduced and the well-being of society is enhanced.

Decentralization Principle: Where decisions must be made collectively, the best place to make them is closest to where the problem occurs.

Do No Harm Principle: Action should be taken only when it is clear that more good than harm is likely to result.

Balancing Principle: The benefits of a chosen policy should exceed its costs.

Efficiency Principle: Other things being equal, we should attempt to reach social goals in the least costly way.

Flexibility Principle: Individuals and firms should be free to meet regulatory requirements in the least costly way and to implement new ideas.

Compensation Principle: Those asked to provide public amenities should be compensated because it is inappropriate to impose the costs of a public good or service on a single person or firm.

Filters. Decision-making filters help identify the appropriate context for environmental decisions. For example, the federal government should not make cost-benefit decisions when local individuals or businesses hold all of the relevant information. Conversely, individuals or local businesses should not make decisions on issues with national or global costs and benefits. The following are some examples of the use of filters:

Consensus filters partition problems based on whether a consensus exists. Lack of a national consensus creates a presumption in favor of applying the decentralization principle and making decisions locally.

Divisibility filters partition problems based on the degree of divisibility. If problems are entirely local and no national consensus exists on a solution, the decentralization principle points to the desirability of local decisions.

Knowledge filters group problems based on our level of knowledge of cause and effect. If we know little about the causes, scope or effects of a problem, the do no harm principle suggests that we should be cautious about adopting solutions.

Risk filters group problems based on the degree of risk they pose. If the risk to health or safety is high, then the flexibility and balancing principles indicate a strong case for strict regulation. If the risk is low, the flexibility and balancing principles suggest that government's role should be limited to setting standards that firms can meet in the least costly ways.

Strategy filters partition problems based on the potential for different types of solutions. For example, we might reduce a pollutant through regulation, use of the tort system, imposition of taxes or fines or the creation of tradable property rights. Once we have identified the potential strategies, we could employ the balancing and flexibility principles to choose among them.

Ownership filters partition problems based on the degree to which property rights are defined and protected. If resources are owned, using the individualism and compensation principles can improve social well-being by clarifying and enforcing responsibilities for environmental wrongs and by rewarding individuals who enhance environmental quality. Where resources are unowned or property rights are not well-defined, other filters and principles are applicable.

Information flow filters separate problems based on the potential for enhancing the availability of information. Many problems can be solved by helping individuals obtain the information they need to make wise decisions. Once we identify who has the information and who needs it, we can apply the appropriate principle to help. When better information flow will not promote better decisions, we must rely on other filters.

The filters help us establish decision-making hierarchies. For example, we would choose decentralized decision making only after we determined that there is no national consensus and that the problem is divisible. We also would want to consult the divisibility filter before we apply the balancing principle. A true balancing of costs and benefits can take place only at the level of decision making where all the relevant factors are considered.

Environmental Benefits

Respecting the environmental covenant should lead to more pollution prevention, more efficient and effective pollution control and quicker pollution cleanup. For example, vehicle smog check programs impose costs and inconveniences on all motorists, yet do little to improve air quality. We could have much cleaner urban air for little extra cost if we took direct action against the 10 percent of cars that cause 50 percent or more of the pollution. The strategy filter would obligate government to consider alternatives to current Environmental Protection Agency guidelines. The efficiency principle would encourage government to choose less costly alternatives. The divisibility and decentralization principles might authorize states or localities to establish their own clean air policies in situations where pollution impacts are strictly local.

Respecting the covenant would correct the government's tendency to cause environmental problems as a side effect of such policies as farm subsidies that encourage overuse of pesticides; below-cost timber sales that encourage over-logging; flood insurance that encourages development in ecologically sensitive areas; and dam and highway construction projects that cause environmental harm. The balancing principle would require government to consider the benefits of environmental quality and the costs of environmental destruction in making policy decisions.

Adherence to the covenant also should create opportunities for landowners to benefit from the wildlife on their land. The strategies and information flow filters would direct government to consider alternatives to the command-and-control approach of the Endangered Species Act. Applying the efficiency and flexibility principles we might discover that we could accomplish more, for the same social cost, if we paid compensation or created a system of rewards to landowners who improve habitat and attract wildlife to their property.

A Model for the Future

New environmentalism starts with the premise that, where possible, we need to let individuals decide how to balance their time and other resources in accordance with their values. Devolving decisions to smaller units of governance is one way to accomplish this end. Creating clearly defined property rights and responsibilities is another. These rights and accompanying responsibilities link people's choices with the costs of making those choices, reinforcing incentives for stewardship.

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